Centre for Cities is an independent, non partisan, research and policy institute committed to improving the performance of UK cities.

March 20, 2013

Where are the foreign businesses in the UK?

Andrew set out yesterday how housing could deliver a short
term stimulus to the UK’s economic conundrum. Another area that the Chancellor
has hoped will deliver jobs and growth is inward investment, as shown by his cutting of corporation
tax and the PM’s recent trip to India.

Cities have been keen to jump on the agenda of inward
investment from foreign businesses too. The suitably vague request for the
signing of a 'Memorandum of Understanding’ with UKTI has been almost ubiquitous
across City Deal submissions and conversations around them.

It’s no surprise that cities are eager to encourage
investment from foreign shores into their cities. But if the Chancellor takes
the opportunity to further incentivise international business into Blighty,
where are they most likely to want to locate?

Our Open
for Business report last year looked at the geography of foreign owned
businesses across the UK. Cities in the Greater South East, led by London, are
the most popular destinations for foreign owned businesses. Almost one in three
of foreign owned firms in the UK are based in these cities, compared with one
in four businesses overall (i.e. those domestically and foreign owned). Cities
in the North West, on the other hand, tend to be the least popular. They are
home to 7.1 per cent of all businesses but just 6.1 per cent of all foreign
owned businesses.

Individually, the two most successful cities in attracting
foreign owned businesses lie outside of the Greater South East. At 7.2 per cent
of the total business base, Swindon has the highest proportion of foreign owned
businesses. It is followed closely by Aberdeen at 7.1 per cent.

While there
is large variation across cities in terms of the share of foreign owned
businesses, there is much less variation in terms of the countries that these
businesses represent.

Businesses
from the USA dominate the total number of foreign firms in our cities. With the
exception of Belfast, businesses whose ultimate parent is based in the USA
account for the most foreign owned businesses in every city in the UK. Reading
in particular is a hotspot for US owned firms– 2.8 percent of its total
businesses had an ultimate parent from the USA in 2010. The next most frequent
countries represented are near neighbours France, Germany and Holland.

The
economies such as China and India are likely to become increasingly important
for purchasing our goods and services. But the BRICS countries are conspicuous
by their absence. Companies from these countries make up no more than 0.2 per
cent of the total business base of the most popular city, Luton. The maps below show the geographies of businesses from the USA, Eurozone and BRICS across UK cities.

It is
likely that any further moves by the Chancellor to attract companies to our
shores in this week’s Budget will fall more loudly on the ears of business
bosses in our traditional heartlands of Europe and the USA, rather than the
fast growers of the developing world. And if history repeats itself, those
businesses listening are most likely to choose cities in the Greater South
East.